A company has an 11% WACC and is considering two mutually exclusive investments (that cannot be...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
A company has an 11% WACC and is considering two mutually exclusive investments (that cannot be repeated) with the following cash flows: 0 1 2 3 4 5 6 7 + + + Project A -$300 -$387 -$193 Project B -$405 $132 $132 -$100 $132 $600 $132 $600 $132 $850 $132 -$180 $0 a. What is each project's NPV? Negative values, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to the nearest cent. Project A: $ Project B: $ b. What is each project's IRR? Do not round intermediate calculations. Round your answers to two decimal places. Project A: Project B: % % c. What is each project's MIRR? (Hint: Consider Period 7 as the end of Project B's life.) Do not round intermediate calculations. Round your answers to two decimal places. Project A: Project B: % % d. From your answers to parts a-c, which project would be selected? -Select- If the WACC was 18%, which project would be selected? -Select- ▼ e. Construct NPV profiles for Projects A and B. If an amount is zero, enter 0. Negative values, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to the nearest cent. NPV Project A Discount Rate 0% $ NPV Project B $ 5 10 12 15 18.11 23.33 f. Calculate the crossover rate where the two projects NPVs are equal. Do not round intermediate calculations. Round your answer to two decimal places. % g. What is each project's MIRR at a WACC of 18%? Do not round intermediate calculations. Round your answers to two decimal places. Project A: Project B: % % A company has an 11% WACC and is considering two mutually exclusive investments (that cannot be repeated) with the following cash flows: 0 1 2 3 4 5 6 7 + + + Project A -$300 -$387 -$193 Project B -$405 $132 $132 -$100 $132 $600 $132 $600 $132 $850 $132 -$180 $0 a. What is each project's NPV? Negative values, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to the nearest cent. Project A: $ Project B: $ b. What is each project's IRR? Do not round intermediate calculations. Round your answers to two decimal places. Project A: Project B: % % c. What is each project's MIRR? (Hint: Consider Period 7 as the end of Project B's life.) Do not round intermediate calculations. Round your answers to two decimal places. Project A: Project B: % % d. From your answers to parts a-c, which project would be selected? -Select- If the WACC was 18%, which project would be selected? -Select- ▼ e. Construct NPV profiles for Projects A and B. If an amount is zero, enter 0. Negative values, if any, should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to the nearest cent. NPV Project A Discount Rate 0% $ NPV Project B $ 5 10 12 15 18.11 23.33 f. Calculate the crossover rate where the two projects NPVs are equal. Do not round intermediate calculations. Round your answer to two decimal places. % g. What is each project's MIRR at a WACC of 18%? Do not round intermediate calculations. Round your answers to two decimal places. Project A: Project B: % %
Expert Answer:
Answer rating: 100% (QA)
Capital Budgeting Analysis a Net Present Value NPV Well use a financial calculator or spreadsheet to ... View the full answer
Related Book For
Posted Date:
Students also viewed these finance questions
-
apple company: 1.what are key characteristics of the industry? 2. where is the company in its life cycle?
-
Quantum Technologies, a computer consulting firm, has decided to write off the $13,000 balance of an account owed by a customer. Illustrate the effects on the accounts and financial statements to...
-
List the participants in the business buying process. What factors influence the buying decision? Discuss the major influences on business buyers.
-
Thomas Rusnack and his then-wife, Analisa Rusnack, opened a home equity line of credit (HELOC) with Cardinal Bank in August 2003. Between 2003 and 2006, the Rusnacks periodically drew on the HELOC...
-
A gourmet coffee shop in downtown San Francisco is open 200 days a year and sells an average of 75 pounds of Kona coffee beans a day. (Demand can be assumed to be distributed normally with a standard...
-
How do i make a ER digram like similar to the following using my relational model My Relational model is the following Has Applications ID Applications Applicant ID Job positions ID Employer ID Apply...
-
3. (3) To plan for your newborn's education, you invest in a mutual fund and will make yearly donations until your child enters the great University of Georgia in 18 years. The mutual fund will...
-
Juan and Cecilia Martinez are married with two children, both of whom live at home. The children are ages 16 and 13. Juan is the vice president of Community Bank, and his annual salary is $94,000....
-
VIA Properly designed and utilized forms facilitate adherence to prescribed internal accounting control policies and procedures. One such form might be a multicopy purchase order, with one copy...
-
JR Computers, a firm that manufactures and sells personal computers is an all- equity firm with 100,000 shares outstanding, $10 million in earnings after taxes and a market value of $ 150 million....
-
Explain how you may apply economic concepts when managing a business/enterprise by answering the questions What are the demand drivers of the product of interest? What are the supply drivers?...
-
3. Consider the Allen and Gale model of contagion, where the storage asset allows the costless transfer of one unit from one time period to another and the illiquid asset pays out R = 2 in period 2...
-
Q5. (a) Three wells, equidistant apart along a straight line, span the entire depth from the land surface to the lower boundary of aquifer 1, which is a confined, homogeneous groundwater aquifer. The...
-
Use the formula to determine the value of the indicated variable for the values given. Use a calculator when one is needed. When necessary, use the key on your calculator and round answers to the...
-
The graph of quadratic function is shown. Which of the following is an equivalent form of the equation of the graph shown above, that displays the x-intercepts of the parabola as constants? y = x -...
-
Real numbers a and b are positive, and the ratio of a to b is 2.25 times the ratio of b to a. What is the value of a/b?
-
Concrete is made by mixing cement, sand, and gravel in the ratio 5 : 9 : 13. How much cement is needed to make 324 ft 3 of concrete? A) 54 ft B) 60 ft C) 84 ft D) 108 ft
-
Why is the effect of a lockdown different from that of an oil shock? There is an important difference between a lockdown and an oil shock. Although a lockdown is typically temporary, not all firms...
-
Why might the 'Goggle mobility index' not be a good measure} of the fall in economic activity during a lockdown? Whether it provides, or not, a good measure of economic activity, depends on the...
-
Fill in the values in the table below for inflation and expected inflation using the 1960s. The data will come from FRED as they did in the last question. You will have the most success using a...
Study smarter with the SolutionInn App